US consumer prices continue slump

Millions have lost their jobs as the USrecession deepens [GALLO/GETTY]

Peter Kenny of Knight Equity Markets said: "The numbers speak to an economy that is in deep recession, but we're no longer in the shock mode of staggering numbers that speak to a serious slide lower in terms of macroeconomic activity, coupled with the threat of inflation."

Deflation fears

The March drop in industrial output was much steeper than the 0.9 per cent decline expected by most analysts, according to the figures released by the Federal Reserve, the US central bank.

Production at US factories, mines and refineries dropped to its lowest level since December 1998 and was nearly 13 per cent below 2008 levels.

Producer prices fell by 3.5 per cent in March compared to the same period a year earlier, the largest decline since 1950, according to the government data.

It has also raised fears of deflation, where prices fall over a sustained period.

This can lead to consumers holding off on purchases in the hope of even lower prices, pushing the economy into further decline.